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PNB Housing Finance IPO review (May apply)

Review By Dilip Davda on Oct 20, 2016

PNB Housing Finance Ltd (PNBHFL) is the fifth largest housing finance company (in terms of loan portfolio) and the second largest (in terms of deposits) promoted by Punjab National Bank (PNB). The company is engaged in housing loan finance business having 51:49 investments from PNB and Carlyle Group. The Company conducts operations through an operating model which, as of June 30, 2016, included 47 branches across the northern, western and southern regions of India and 16 processing hubs (which include three co-located zonal offices) and central support office (“CSO”) in New Delhi. Its distribution network included over 7,110 channel partners across different locations in India as of June 30, 2016, including in-house sales team as well as external direct marketing associates (the “DMAs”), deposit brokers and national aggregator relationships with reputed brands. As part of the Business Process Transformation & Re-Engineering, the Company repositioned the “PNB Housing” brand, which required all offices to be revamped, creation of our new logo and its tagline, “Ghar Ki Baat”, the re-launch of refreshed, mobile-friendly website, an increased online presence and new marketing communication to enhance brand image.

To augment its capital base to meet its future capital requirements, the company is coming out with a maiden IPO of approx. 38709700 shares (based on higher price band) via book building route having a price band of Rs. 750-775 to mobilize Rs. 3000 crore. Minimum application is to be made for 19 shares and in multiples thereon, thereafter. Issue opens for subscription on 25.10.16 and will close on 27.10.16. It has earmarked 250000 equity shares from the IPO for eligible employees who will be offered a discount of Rs. 75 per share. Having issued equity at par during 1988 to 1999, it further issued equity at a price ranging from Rs. 101.50 to Rs. 130 per share as rights issue and has also issued 6470589 shares as bonus shares in March 2013. There is no stake sell by any existing stakeholders. Its current paid up equity capital of Rs. 126.92 crore will stand enhanced to Rs. 165.63 crore.

The GCBRLMs to the Issue are Kotak Mahindra Capital Company Limited, DSP Merrill Lynch Limited, JM Financial Institutional Securities Limited, J. P. Morgan India Private Limited and Morgan Stanley India Company Private Limited. Link Intime India Pvt Ltd is the registrar to the issue. Post allotment, shares will be listed on BSE and NSE.

PNBHFL’s loan portfolio grew at a CAGR of 61.76% from Rs. 3969.66 cr. as of March 31, 2012 to Rs. 27177.27 crore as of March 31, 2016. As of June 30, 2016, its loan portfolio had further increased to Rs. 30900.64 crore. For the last three fiscals it has posted total revenue from operations/ net profits of Rs. 1120.32 cr. / Rs. 129.70 cr. (FY14), Rs. 1780.38 cr. / Rs. 194.07 cr. (FY15) and Rs. 2699.54 cr. / Rs. 327.57 cr. (FY16). For Q1 of the current fiscal, it has earned net profit of Rs. 96.03 crore on revenue from operations of Rs. 863.44 crore. If we annualized these latest earnings and attribute to the fully diluted equity post IPO then asking price is at a P/E of 33 plus against industry average of 26 and other peers like GRUH at 48, Repco Home at 33, HDFC at 31, LICHF at 26 and DHFL at 13 (as on 30.09.16). Thus issue appears to be fully priced with coming few years’ estimated earnings. However, with more funds at its disposal post IPO will also help it to have better NAV.

On BRLM’s front, five merchant bankers associated with this issue have handled twenty two public issues in the past three years, out of which nine issues closed below the issue price on the listed date.

Conclusion: As issue appears to be fully priced, Risk savvy cash surplus investors may consider investment for long term.


Conclusion / Investment Strategy

As issue appears to be fully priced, Risk savvy cash surplus investors may consider investment for long term.

Review By Dilip Davda on Oct 20, 2016

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

PNB Housing Finance IPO FAQs

  1. 1. Why PNB Housing Finance IPO?

    The initial public offer (IPO) of PNB Housing Finance Ltd offers an early investment opportunity in PNB Housing Finance Ltd. A stock market investor can buy PNB Housing Finance IPO shares by applying in IPO before PNB Housing Finance Ltd shares get listed at the stock exchanges. An investor could invest in PNB Housing Finance IPO for short term listing gain or a long term.

  2. 2. How is PNB Housing Finance IPO?

    Read the PNB Housing Finance IPO recommendations by the leading analyst and leading stock brokers.

    • Ajcon Global Services Ltd - Apply
    • Dilip Davda - May apply
    • Hem Securities - Apply
    • ICICI Direct - Apply
    • KR Choksey Securities Ltd - Apply
  3. 3. PNB Housing Finance IPO what should investors do?

    PNB Housing Finance IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the PNB Housing Finance IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is PNB Housing Finance IPO good?

    Our recommendation for PNB Housing Finance IPO is to subscribe for long term.

  5. 5. Is PNB Housing Finance IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the PNB Housing Finance IPO.

  6. 6. When will PNB Housing Finance IPO allotment status?

    The PNB Housing Finance IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit PNB Housing Finance IPO allotment status to check.

  7. 7. When will PNB Housing Finance IPO list?

    The PNB Housing Finance IPO will list on Monday, November 7, 2016, at BSE, NSE.